Last month's pro-democracy protests in Burma and the junta's ruthless and bloody crackdown have hit tourism hard, with some hotels slashing prices by 80% to try to attract visitors, industry insiders said.

"There has been a steep drop in foreign arrivals - both businessmen and tourists - since the protests reached a climax in the last week of September," a manager at a Rangoon-based travel agency said yesterday. Most hotels had more than halved their rates, the manager said, but occupancy levels were below break-even point, a reflection of the outrage at last month's crackdown on monks and civilians in which at least 10 people were killed.

According to the Myanmar Times, a semi-official business weekly, the Savoy Hotel has axed its prices to just $20 (£9.80) a night, compared with a normal high season rate of $110.

"Business has been very bad. Most of us have been out of a job for weeks," said one English-speaking tour guide. "It is not just because of the seasonal factor. We had a lot of cancellations. "

Even before the unrest tourism was in a parlous state, partly due to activists' calls for a boycott in order to keep tourist dollars out of the generals' pockets. Burma says it had 192,000 tourists in the year to March. By contrast, neighbouring Thailand expects about 13 million visitors this year, and even war-scarred Cambodia is aiming for 2 million.

Airlines have also been hit by the crisis. Domestic flight schedules had to be altered because of curfews imposed on Rangoon and Mandalay, and even unaffected flights are half-empty. A businessman who flew in from Singapore last week on an Air Bagan Airbus capable of carrying more than 200 passengers said there were only two dozen people on board.

To make matters worse, the generals have just decreed that from October 15 domestic airlines will have to fly daily to Naypyidaw, their half-built and sparsely populated new capital 240 miles north of Rangoon - even if the planes are empty.

Meanwhile Laura Bush, long a quiet supporter of democracy activists in Burma, yesterday called for the junta to stand down. "General Than Shwe and his deputies are a friendless regime. They should step aside to make way for a unified Burma governed by legitimate leaders," the American first lady wrote in yesterday's Wall Street Journal.

The article was outspoken for Mrs Bush, who has rarely tried to influence policy. She has been engaged for several years in behind-the-scenes support for Aung San Suu Kyi, the opposition leader.